Eden Hill Journal

Comments, dreams, stories, and rantings from a middle-aged native of Maine living on a shoestring and a prayer in the woods of Maine. My portion of the family farm is to be known as Eden Hill Farm just because I want to call it that and because that's the closest thing to the truth that I could come up with. If you enjoy what I write, email me or make a comment. If you enjoy Eden Hill, come visit.

Thursday, March 18, 2010

Size Matters

It has become clear to most Americans and to investors around the world that the US dollar is shrinking. One of the best ways to measure its size is to measure how many dollars fit into an ounce of gold. The general trend is that as time goes by, it takes more and more dollars to fill up that ounce. Currently it's somewhere in the neighborhood of $1,100 give or take a hundred.

We're all led to believe that the worth of a dollar is market-driven but we base that assumption on propaganda. The truth is that those wealthy people who run our country need to devalue the dollar and are having one heck of a hard time doing it. One hang-up is, of course, the fear of inflation. If the devaluation of the dollar is seen as causing inflation, then there will be a corresponding upward pressure on wages and entitlements. If wages and entitlements go up, the whole purpose of devaluing the dollar is lost, gone kaput.

Wait a minute...

How can I make that claim? How is it that rising wages defeats the purpose of shrinking the dollar?

To understand this you need to look at what the wealthy are trying to achieve. I know a boner this big is hard to swallow, but here's the real deal. Back in the 1980s when Ronald Reagan was president, one of the biggest challenges in government was what to do about the existing problem of inflation. Nixon had tried and failed with price controls. Inflation was running wild through the Ford and Carter presidencies. Reagan's solution was multi-fold. First he worked to deregulate industry to spur competition and drive down prices. Second he turned government and the American consumer against unions because unions always push for higher labor costs and these high wages are always reflected in higher prices for American-made products. But neither of these efforts was enough to control inflation so he pushed for another tool, outsourcing. It was Reagan who really thrust America into the WalMart age when he broke down the protections against low-cost foreign-made goods.

We all intuitively know that Globalization and outsourcing and WalMart have resulted in lower prices at the checkout counter. That's a no-brainer. What we have been programmed by propaganda to deny is that government has deliberately encouraged Globalization and Free Trade to fight against inflation. It is just as intuitive to see, but we are programmed not to think of it in those terms.

Why?

Because government doesn't want to be seen as working against the American worker. Government wants to be seen as working in favor of the American consumer.

Does anybody remember Ross Perot's "giant sucking sound" back in the 1992 presidential election debates? George Bush Sr. was president. Bill Clinton was the Democrat challenger. Ross Perot was an independent challenger. Perot's message was that NAFTA and other Globalization efforts were draining jobs away from the American workforce. He was right, of course. We can all see that now. The American worker is one hurting puppy in today's economy. We have accepted Reagan's inflation-fighting ideas and now one of the greatest ironies in America is that it is prohibitively expensive to manufacture anything here.

That's a generality, of course, but the point is this. If we continue to spend most of our money buying foreign-made goods, eventually we will run out of money.

Did you get that?

We will run out of money. Americans will run out of money. If we keep buying at WalMart we will run out of money because that money doesn't work its way back into American pockets. It gets shipped to China instead.

OK so that's simple enough for even a simpleton like myself to understand. Ross Perot's argument was popular among simple American folk.

But is that the reality of what is going on in 2010? How does 2010 fit into Perot's 1992 vision?

During the eight years of George W. Bush it was becoming clear that something strange was going on but it was all being done behind closed curtains. We couldn't see what was happening. We knew job creation was not keeping up with the workforce but the nation's official unemployment figures looked healthy so whatever was happening was happening out of sight. All of the factors of Reagan economics were fully in play. America's workforce was in decay. Outsourcing was the way to make money if you were an investor or a businessman. WalMart was all the rage. Yet we didn't believe we were running out of money.

How can that be?

Word has it we were running on credit. We weren't so much actually earning the money we were spending to buy all this foreign stuff we were buying. We were charging it to credit accounts.

Time ran out.

2008 happened.

Then 2009...

Now it's 2010 and we are in some deep doo doo. The sucking sound really did happen and time has finally run out. We ran out of money and the credit market crashed just as we all knew it would.

To make things even worse, we pissed off the people who had hoarded away all the money. We pissed off the wealthy bankers and investors. We elected Democrats to Congress and to the White House and investors decided that now is just about the worst time ever to invest in America.

OK, so...

We are out of money.

What can we do about it?

We can't lower wages. Americans would sh*t a brick if we lowered the minimum wage. But workers all over the world are working to produce our goods at wages far lower than the American minimum wage.

We can't close the borders to trade. We can't become protectionist and levy tariffs on low-priced goods. Consumers would sh*t a brick if Congress did that to us, if we were paying government tariffs on the stuff we buy at WalMart.

What's left to do?

Well the answer is to somehow bring down American wages while not making it appear that we are doing that. We need to make it affordable once again to produce goods in America without triggering inflation. Whatever we do, it can't appear to the average American worker that we are suffering inflation. We can't drive up the price of labor in America but we have to give American workers production jobs. How? By somehow making labor in America as inexpensive as it is anywhere else in the world.

How do we do that?

By devaluing the dollar, that's how. We keep the value of the dollar on an even keel here in America while at the same time making it worth less in terms of foreign currencies. We convince China to let us devalue the dollar without it devaluing the yuan. We then print as much money as we need, circulate it everywhere, but make it look to the American consumer that prices aren't going up, that inflation isn't a problem, that American wages don't need to rise to compensate. By the time we figure out what happened it'll all be over, it'll be too late to do it any other way. America will be back to work and anything we do to correct for low wages will be counterproductive. America's labor force will have joined the third world right where the wealthy investors and businessmen want us.

Wednesday, March 10, 2010

Fast Toyota

I have a Toyota. It isn't a new one by any means, but it's a fast car. Top end is somewhere around 140 mph. I've never attempted that, of course, but I imagine it would do it if the gas pedal were to somehow stick to the floor. A couple of times this winter the gas pedal did stick open but not all the way open, just enough to give me a start. But I don't think my 95 Avalon is wired the way the newer ones are wired. Mine seems to have a cable from the gas pedal to the engine rather than a sensor with wires to the computer and an electric motor on the engine with feedback to the computer.

It's hard to get the story straight. I am somewhat of a car buff but I have yet to see any news article that is written well enough for even someone with my car knowledge to get a good picture of what is involved with these runaway Toyotas. One would think that the whole idea is to scare people rather than to inform.

One thing that really is bugging me is this...

WHY do the drivers who find themselves on the highway in runaway Toyotas not SHUT OFF THE IGNITION?

I just reviewed the CBS News coverage of this week's runaway Prius in California where the guy was on the phone with 911 for something like 20 minutes. Did the 911 operator suggest turning off the engine? CBS mentioned that the driver finally "kept pressing the off button" after he had sufficiently showed the car down using the brakes on an uphill grade.

In a car, what is the "off button"?

OK so I'll have to go check out a Prius. Maybe they have an off button.

But you know what? If I owned one of these newer Toyotas and if I chose to remain loyal to the brand and keep driving it, I think I'd practice turning off the engine while driving down the road. I'm surprised that national network television and the Toyota company itself are not training Toyota owners how to stop their cars in an emergency. Shouldn't it be clear by now with dozens of reported deaths that using the brakes isn't enough?

Practice it, people. Practice when there's no traffic around you. Try it when you're going slow at first and get used to how it is done and what the effects are. When you have that down, practice it at higher speeds. That's what I would do if I owned a newer Toyota. If it can't be done or if it isn't safe to do that, then I'd sell the car.